Operational Efficiency, Service Quality, and Firm Performance: A Strategic Orientation Perspective
DOI: https://doi.org/10.65967/cpbo.v2i2.62
Operational Efficiency, Service Quality, Strategic Orientation, Profitability, Airline Industry
Abstract
This study investigates the interaction between operational efficiency (OE) and service quality (SQ) in shaping firm profitability, while considering the moderating role of strategic orientation (SO), specifically focused and non-focused strategies. Drawing on the perspectives of competitive priorities and contingency theory, this research proposes that the effectiveness of balancing efficiency and quality depends on a firm's strategic positioning. Using panel data from the U.S. airline industry, the study applies econometric techniques and a series of robustness tests, including alternative model specifications, to ensure the validity and reliability of the findings. The results indicate that different dimensions of operational efficiency interact with service quality in distinct ways when influencing profitability. Although the interaction effects between operational efficiency and service quality are generally negative and consistent with theoretical expectations, they are not statistically significant, suggesting the presence of contextual factors that may shape these relationships. Furthermore, strategic orientation is found to play a significant moderating role in the relationship between operational efficiency, service quality, and profitability. In particular, strategic orientation strengthens the interaction between labor productivity and service quality, implying that firms can achieve superior performance when efficiency and quality initiatives are aligned with their strategic priorities. This study contributes to the operations and strategic management literature by reconciling inconsistent findings regarding the efficiency–quality–performance nexus and demonstrating the importance of strategic orientation as a contingency factor. The findings provide a more comprehensive understanding of how firms can balance operational efficiency and service quality to enhance profitability under different strategic contexts.
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